Commodity prices fell overall in 2023, especially natural gas prices, but also oil and industrial metal prices. Meanwhile, the price of gold climbed to new highs. ETCs were not popular, not even gold ETCs.
28December 2023. FRANKFURT (Börse Frankfurt). 2023 was not a year for commodity investments - there was more to be gained elsewhere. While the stock markets recorded double-digit percentage gains, the Bloomberg Commodity Index, which tracks 20 commodities, lost almost 11%. ETC investors also turned away: European commodity ETCs saw an outflow of EUR 3.5 billion this year (up to the end of November), as reported by the Munich-based analysis and trading company Crossflow. Over a three-year period, this brings the total loss to 5.9 billion euros.
"Upside potential for gold exhausted"
The focus of sales this year: gold ETCs with outflows of 7.3 billion euros; only commodity baskets fared comparatively well with net inflows of 2.8 billion euros. The price of gold reached a new all-time high in 2023: at the beginning of the year, the troy ounce was still trading at USD 1,820, at the beginning of December it was USD 2,135, more than ever before. It is currently still at 2,073 US dollars. The trigger: the prospect of interest rates falling again. As gold does not yield interest, it becomes more attractive when interest rates fall.
Opinions differ on the further development of the gold price: "We consider the market's expectations of the Fed's interest rate cut to be exaggerated and see the upside potential for the gold price as exhausted for the time being," comments commodities analyst Dora Borbély from DekaBank. She sees the gold price at only USD 1,920 in December 2024. According to Imaru Casanova, Portfolio Manager Gold and Precious Metals at VanEck, however, the outlook for the gold price remains positive - in 2024 and beyond. Casanova expects high interest rates as well as the war in Ukraine and the Middle East to weigh on the US economy, which will benefit gold. "In 2024, gold could test and break through the recent all-time highs."
As usual, ETC trading on Xetra this year mostly revolved around gold ETCs, especially Xetra-Gold (DE000A0S9GB0). According to ETC traders, gold ETCs from Xtrackers (DE000A2T5DZ1), Amundi (FR0013416716), WisdomTree (JE00B1VS3770, GB00B00FHZ82) and iShares (IE00B4ND3602) also regularly recorded high turnover. Turnover in silver price trackers (IE00B43VDT70) was also repeatedly higher.
Xetra-Gold holdings have declined somewhat, but are still at a high level at currently 199 tons. As a reminder: at the end of 2022 it was 231 tons, at the end of 2021 238 tons.
Brent price: from 83 to 79 US dollars
The oil price has been quite volatile this year: a barrel of Brent crude traded between USD 70 and USD 96. The bottom line was a slight downward trend: a barrel currently costs USD 79 after USD 83 a year ago. Speculation about the demand for oil in times of high interest rates and supply surpluses or shortages was a recurring driver.
"The global oil market is not starting 2024 with a pronounced supply deficit, as was expected just a few months ago," explains Borbély. There could even be a supply surplus in 2024. This is mainly due to the surprisingly strong increase in oil production, for example in the USA and Brazil. On the demand side, the slowdown caused by the global economic downturn will initially be felt, but this will ease. All in all, however, global oil consumption will only increase moderately, not least due to China's weak growth. The bank forecasts 85 US dollars at the end of 2024.
Price slump for natural gas
There was a lot of movement in the price of natural gas, which more than halved in 2023. The futures contract for Dutch natural gas (Dutch TTF), which is relevant for Europe, was still at over EUR 80/MWh at the start of the year, but is currently at EUR 35/MWh. The highs from the summer of 2022, when it briefly exceeded EUR 300/MWh, are a long way off.
Crossflow reports smaller net inflows of EUR 173 million for energy ETCs this year. The ETC traders report consistently brisk turnover for the WisdomTree WTI Crude Oil (GB00B15KXV33), the WisdomTree Brent Crude Oil (JE00B78CGV99), the WisdomTree Natural Gas (JE00BN7KB334), but also short and leveraged products such as the WisdomTree Brent Crude Oil 3x Daily Short (IE00BLRPRK35), the WisdomTree WTI Crude Oil 2x Daily Leveraged (JE00BDD9Q840) or the WisdomTree Natural Gas 3x Daily Leveraged Long and Short (IE00BLRPRG98, IE00B76BRD76).
Industrial metals: no big jumps
As far as European industrial metals ETCs are concerned, Crossflow reported net inflows of EUR 860 million this year. After a small increase at the beginning of the year, industrial metal prices fell over the course of the year. The WisdomTree Industrial Metals (GB00B15KYG56) is down 14% in 2023, while WisdomTree Copper (GB00B15KXQ89), which is also widely traded, is at the same level as at the end of 2022.
Metal prices are currently benefiting from the prospect of faster interest rate cuts, as Barbara Lambrecht from Commerzbank notes. "However, demand prospects in China and metal-specific production trends are also of fundamental importance on the metal markets." According to DekaBank, the global economy as a whole will remain on a flat growth path in the coming years. "This means that only a moderate increase in global demand for raw materials is expected overall," emphasizes Borbély. "This applies in particular to cyclically sensitive commodity sectors such as industrial metals."
by: Anna-Maria Borse, December 28, 2023, © Deutsche Börse AG
